Chapter 9 Organizational structure and design

8/9/2019 Chapter 9 Organizational structure and design

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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9–1

rgani!ationalrgani!ational

"tructure and"tructure and#esign#esign

Chapter Chapter

99

$anage%ent "tephen P. &obbins $ary Coulter

tenth edition


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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9–(

'earning utco%es'earning utco%es9.$ %echanistic and Organic Structures9.$ %echanistic and Organic Structures

• &ontrast mechanistic and organic organizations.&ontrast mechanistic and organic organizations.

• !"plain the contingency factors that affect!"plain the contingency factors that affect

organizational design.organizational design.

9.' &ommon Organizational Designs9.' &ommon Organizational Designs

• &ontrast the three traditional organizational designs.&ontrast the three traditional organizational designs.

• Descrie the contemporary organizational designs.Descrie the contemporary organizational designs.

• Discuss the organizational design challenges facingDiscuss the organizational design challenges facing

managers today.managers today.


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#esigning rgani!ational "tructure#esigning rgani!ational "tructure

• OrganizingOrganizing (rranging and structuring work to accomplish an organization)s (rranging and structuring work to accomplish an organization)s

goals.goals.

• Organizational StructureOrganizational Structure *he formal arrangement of +os within an organization.*he formal arrangement of +os within an organization.

• Organizational DesignOrganizational Design ( process involving decisions aout si" key elements ( process involving decisions aout si" key elements

-ork specialization-ork specialization

DepartmentalizationDepartmentalization

&hain of command&hain of command Span of controlSpan of control

&entralization and decentralization&entralization and decentralization

ormalizationormalization


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E+hibit 9–1E+hibit 9–1 Purposes o rgani!ingPurposes o rgani!ing

• #i-ides or/ to be done into speciic obs anddepart%ents.

• ssigns tas/s and responsibilities associated ith

indi-idual obs.

• Coordinates di-erse organi!ational tas/s.

• Clusters obs into units.

• Establishes relationships a%ong indi-iduals,

groups, and depart%ents.

• Establishes or%al lines o authority.

• llocates and deploys organi!ational resources.


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rgani!ational "tructurergani!ational "tructure• -ork Specialization-ork Specialization

*he degree to which tasks in the organization are*he degree to which tasks in the organization are

divided into separate +os with each step completeddivided into separate +os with each step completed

y a different person.y a different person.

Overspecialization can result in human diseconomiesOverspecialization can result in human diseconomies

from oredom, fatigue, stress, poor /uality, increasedfrom oredom, fatigue, stress, poor /uality, increased

asenteeism, and higher turnover.asenteeism, and higher turnover.


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E+hibit 9–2E+hibit 9–2 *he ive &ommon orms of

Departmentalization


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E+hibit 9–2 8contd: Product #epart%entali!ationE+hibit 9–2 8contd: Product #epart%entali!ation


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E+hibit 9–2 8contd: Process #epart%entali!ationE+hibit 9–2 8contd: Process #epart%entali!ation

; $ore eicient lo o or/ acti-ities

– Can only be used ith certain types o products


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E+hibit 9–2 8contd: Custo%er #epart%entali!ationE+hibit 9–2 8contd: Custo%er #epart%entali!ation

; Custo%ers needs and proble%s can be %et by specialists

< #uplication o unctions

< 'i%ited -ie o organi!ational goals


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rgani!ational "tructure 8contd:rgani!ational "tructure 8contd:• (uthority (uthority

*he rights inherent in a managerial position to tell*he rights inherent in a managerial position to tell

people what to do and to e"pect them to do it.people what to do and to e"pect them to do it.

• 0esponsiility0esponsiility

*he oligation or e"pectation to perform.*he oligation or e"pectation to perform.

• nity of &ommandnity of &ommand

*he concept that a person should have one oss and*he concept that a person should have one oss and

should report only to that person.should report only to that person.


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rgani!ational "tructure 8contd:rgani!ational "tructure 8contd:• Span of &ontrolSpan of &ontrol

*he numer of employees who can e effectively and efficiently*he numer of employees who can e effectively and efficientlysupervised y a manager.supervised y a manager.

-idth of span is affected y-idth of span is affected y

Skills and ailities of the manager Skills and ailities of the manager

!mployee characteristics!mployee characteristics

&haracteristics of the work eing done&haracteristics of the work eing done

Similarity of tasksSimilarity of tasks

&omple"ity of tasks&omple"ity of tasks

2hysical pro"imity of suordinates2hysical pro"imity of suordinates

Standardization of tasksStandardization of tasks

Sophistication of the organization)s information systemSophistication of the organization)s information system

Strength of the organization)s cultureStrength of the organization)s culture

2referred style of the manager2referred style of the manager


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E+hibit 9–(E+hibit 9–( Contrasting "pans o ControlContrasting "pans o Control


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rgani!ational "tructure 8contd:rgani!ational "tructure 8contd:• &entralization&entralization

*he degree to which decision making is concentrated*he degree to which decision making is concentrated

at upper levels in the organization.at upper levels in the organization. Organizations in which top managers make all the decisionsOrganizations in which top managers make all the decisions

and lower3level employees simply carry out those orders.and lower3level employees simply carry out those orders.

• DecentralizationDecentralizationOrganizations in which decision making is pushedOrganizations in which decision making is pushed

down to the managers who are closest to the action.down to the managers who are closest to the action.

• !mployee !mpowerment!mployee !mpowerment 4ncreasing the decision3making authority 5power6 of4ncreasing the decision3making authority 5power6 of

employees.employees.


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E+hibit 9–)E+hibit 9–) 5actors that Inluence the %ount o5actors that Inluence the %ount o

Centrali!ation and #ecentrali!ation Centrali!ation and #ecentrali!ation

• %ore &entralization%ore &entralization

!nvironment is stale.!nvironment is stale.

7ower3level managers are not as capale or e"perienced at7ower3level managers are not as capale or e"perienced at

making decisions as upper3level managers.making decisions as upper3level managers.

7ower3level managers do not want to have a say in decisions.7ower3level managers do not want to have a say in decisions.

Decisions are relatively minor.Decisions are relatively minor.

Organization is facing a crisis or the risk of company failure.Organization is facing a crisis or the risk of company failure.

&ompany is large.&ompany is large.

!ffective implementation of company strategies depends on!ffective implementation of company strategies depends on

managers retaining say over what happens.managers retaining say over what happens.


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E+hibit 9–) 8contd: 5actors that Inluence the %ountE+hibit 9–) 8contd: 5actors that Inluence the %ount

o Centrali!ation and #ecentrali!ation o Centrali!ation and #ecentrali!ation

• %ore Decentralization%ore Decentralization !nvironment is comple", uncertain.!nvironment is comple", uncertain.

7ower3level managers are capale and e"perienced at making7ower3level managers are capale and e"perienced at making

decisions.decisions.

7ower3level managers want a voice in decisions.7ower3level managers want a voice in decisions.

Decisions are significant.Decisions are significant.

&orporate culture is open to allowing managers to have a say in&orporate culture is open to allowing managers to have a say in

what happens.what happens.

&ompany is geographically dispersed.&ompany is geographically dispersed.

!ffective implementation of company strategies depends on!ffective implementation of company strategies depends on

managers having involvement and fle"iility to make decisions.managers having involvement and fle"iility to make decisions.


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E+hibit 9–*E+hibit 9–* $echanistic =ersus rganic rgani!ation$echanistic =ersus rganic rgani!ation

> High speciali!ation

> &igid depart%entali!ation

> Clear chain o co%%and

> ?arro spans o control

> Centrali!ation

> High or%ali!ation

> Cross Cross 5ree lo o inor%ation

> @ide spans o control

> #ecentrali!ation

> 'o or%ali!ation


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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

9–2(

Contingency 5actors 8contd:Contingency 5actors 8contd:

• Strategy rameworksStrategy rameworks

4nnovation4nnovation

2ursuing competitive advantage through meaningful and2ursuing competitive advantage through meaningful anduni/ue innovations favors an organic structuring.uni/ue innovations favors an organic structuring.

&ost minimization&ost minimization ocusing on tightly controlling costs re/uires a mechanisticocusing on tightly controlling costs re/uires a mechanistic

structure for the organization.structure for the organization.


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Contingency 5actors 8contd:Contingency 5actors 8contd:• Strategy and StructureStrategy and Structure

(chievement of strategic goals is facilitated y (chievement of strategic goals is facilitated y

changes in organizational structure thatchanges in organizational structure that

accommodate and support change.accommodate and support change.

• Size and StructureSize and Structure

(s an organization grows larger, its structure tends to (s an organization grows larger, its structure tends to

change from organic to mechanistic with increasedchange from organic to mechanistic with increased

specialization, departmentalization, centralization,specialization, departmentalization, centralization,

and rules and regulations.and rules and regulations.


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Contingency 5actors 8contd:Contingency 5actors 8contd:• *echnology and Structure*echnology and Structure

Organizations adapt their structures to theirOrganizations adapt their structures to their

technology.technology.

-oodward)s classification of firms ased on the-oodward)s classification of firms ased on the

comple"ity of the technology employedcomple"ity of the technology employed Anit productionAnit production of single units or small atchesof single units or small atches

$ass production$ass production of large atches of outputof large atches of output

Process productionProcess production in continuous process of outputsin continuous process of outputs

0outine technology : mechanistic organizations0outine technology : mechanistic organizations;on3routine technology : organic organizations;on3routine technology : organic organizations


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Contingency 5actors 8contd:Contingency 5actors 8contd:• !nvironmental ncertainty and Structure!nvironmental ncertainty and Structure

%echanistic organizational structures tend to e most%echanistic organizational structures tend to e most

effective in stale and simple environments.effective in stale and simple environments.

*he fle"iility of organic organizational structures is*he fle"iility of organic organizational structures is

etter suited for dynamic and comple" environments.etter suited for dynamic and comple" environments.


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Co%%on rgani!ational #esignsCo%%on rgani!ational #esigns

• *raditional Designs*raditional DesignsSimple structureSimple structure

7ow departmentalization, wide spans of control, centralized7ow departmentalization, wide spans of control, centralized

authority, little formalizationauthority, little formalization

unctional structureunctional structure Departmentalization y functionDepartmentalization y function

# Operations, finance, marketing, human resources, andOperations, finance, marketing, human resources, and

product research and developmentproduct research and development

Divisional structureDivisional structure &omposed of separate usiness units or divisions with limited&omposed of separate usiness units or divisions with limited

autonomy under the coordination and control the parentautonomy under the coordination and control the parent

corporation.corporation.


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E+hibit 9–3E+hibit 9–3 "trengths and @ea/nesses o 4raditional"trengths and @ea/nesses o 4raditional

rgani!ational #esigns rgani!ational #esigns


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9–29

E+hibit 9–7E+hibit 9–7 Conte%porary rgani!ational #esignsConte%porary rgani!ational #esigns

4ea% "tructure4ea% "tructure

•• -hat it is-hat it is ( structure in which the entire organization is made up of ( structure in which the entire organization is made up ofwork groups or teams.work groups or teams.

•• (dvantages (dvantages !mployees are more involved and empowered. 0educed!mployees are more involved and empowered. 0educedarriers among functional areas.arriers among functional areas.

•• DisadvantagesDisadvantages ;o clear chain of command. 2ressure on teams to perform.;o clear chain of command. 2ressure on teams to perform.

$atri+


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9–(0

E+hibit 9–7 8contdE+hibit 9–7 8contd : Conte%porary rgani!ational: Conte%porary rgani!ational

#esigns #esigns

Boundaryless "tructureBoundaryless "tructure

-hat it is-hat it is ( structure that is not defined y or limited to artificial ( structure that is not defined y or limited to artificialhorizontal, vertical, or e"ternal oundaries includes virtualhorizontal, vertical, or e"ternal oundaries includes virtualand network types of organizations.and network types of organizations.

•• (dvantages (dvantages 8ighly fle"ile and responsive. Draws on talent wherever it)s8ighly fle"ile and responsive. Draws on talent wherever it)sfound.found.

•• DisadvantagesDisadvantages 7ack of control. &ommunication difficulties.7ack of control. &ommunication difficulties.


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rgani!ational #esigns 8contd:rgani!ational #esigns 8contd:• &ontemporary Organizational Designs&ontemporary Organizational Designs

*eam structures*eam structures

*he entire organization is made up of work groups or self3*he entire organization is made up of work groups or self3

managed teams of empowered employees.managed teams of empowered employees.

%atri" and pro+ect structures%atri" and pro+ect structures Specialists from different functional departments areSpecialists from different functional departments are

assigned to work on pro+ects led y pro+ect managers.assigned to work on pro+ects led y pro+ect managers.

%atri" and pro+ect participants have two managers.%atri" and pro+ect participants have two managers.

4n pro+ect structures, employees work continuously on4n pro+ect structures, employees work continuously onpro+ects moving on to another pro+ect as each pro+ect ispro+ects moving on to another pro+ect as each pro+ect is

completed.completed.


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9–((

&e%o-ing E+ternal Boundaries&e%o-ing E+ternal Boundaries• =irtual rgani!ation=irtual rgani!ation

n organi!ation that consists o a s%all core o ull


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4odays rgani!ational #esign4odays rgani!ational #esign

ChallengesChallenges• =eeping !mployees &onnected=eeping !mployees &onnected

-idely dispersed and moile employees-idely dispersed and moile employees

• loal Structural 4ssues

&ultural implications of design elements&ultural implications of design elements


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9–(*

4er%s to no4er%s to no• organizingorganizing

• organizational structureorganizational structure• organizational chartorganizational chart• organizational designorganizational design• work specializationwork specialization• departmentalizationdepartmentalization• cross3functional teamscross3functional teams• chain of commandchain of command• authorityauthority• responsiilityresponsiility• unity of commandunity of command• span of controlspan of control

• centralizationcentralization• decentralizationdecentralization• employee empowermentemployee empowerment• formalizationformalization

• mechanistic organizationmechanistic organization

• organic organizationorganic organization• unit productionunit production• mass productionmass production• process productionprocess production• simple structuresimple structure•

functional structurefunctional structure

• divisional structuredivisional structure• team structureteam structure• matri" structurematri" structure• pro+ect structurepro+ect structure• oundaryless organizationoundaryless organization

• virtual organizationvirtual organization• network organizationnetwork organization• learning organizationlearning organization


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9–(

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2rinted in the nited States of (merica.2rinted in the nited States of (merica.

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Chapter 9 Organizational structure and design